July 02, 2013

Basic income vs capitalism

On the one hand, the merits of a guaranteed income for all seem clear:

- It would be simple to administer, which should appeal to governments wanting to cut "wasteful" public spending.

- In giving an unconditional income to all, workers would be able to take on insecure jobs, training, internships or zero-hours jobs without fear of losing their benefits. In this sense, A BI underpins the flexible labour market.

- A BI could free people to do voluntary work, thus helping to promote the "Big Society."

- In replacing tax credits, A BI could well be associated with lower marginal withdrawal rates (pdf) than at present. This could increase work incentives.

The case for some kind of BI, then, seems strong. And herein lies my paradox. If the case is so strong, why has it for years not been considered by the main political parties, other than the Greens?

It's not obviously because it's unaffordable. I reckon a BI of around £130 per week - £20 more than the basic state pension and almost twice the JSA rate - could be paid for by scrapping current spending on social security and tax credits and by abolishing some of the many tax allowances (pdf), the most important being the £62.5bn cost of the personal allowance.

Instead, it's because A BI breaks with a fundamental principle of the welfare state. This, wrote Beveridge in 1942, is "to make and keep men fit for service.*" One function of the welfare state is to ensure that capital gets a big supply of labour, by making eligibity for unemployment benefit conditional upon seeking work. BI, however, breaks this principle.In its pure form, it allows folk to laze on the beach all day.

For many of us - including Philippe van Parijs who first alerted me to the merits of BI - this is not a bug but a feature. Jobs are scarce, so it's better for workers if some are subsidized not to seek them, leaving more opportunities for those who do want to work.

However, this is certainly not in the interests of capitalists, who want a large labour supply - a desire which is buttressed by the morality of reciprocal altruism and the work ethic. It is the fear that a BI would lead to mass skiving that keeps it off the political agenda.

Is such a fear justified? I don't know. Empirically, it's ambiguous, as a BI would - as I've said - in some ways improve work incentives. For capitalists, though, it is a risky prospect.

My suspicion is that a full BI is, for this reason, incompatible with capitalism. Yes, it might well be efficient in many ways. But capitalism is about maximizing profits, not utility.

* I can't find the full text of the Beveridge report online. The quote is on p170 of the version I read ages ago.

Comments

While I am all for basic income for the same reasons you are, I think it's important that you don't abolish social security entirely simply because there are many people, e.g. people with disabilities, elderly people with long-term illnesses who can't work and receive more than what a basic income would consist of at present and need that money, e.g. travel costs, accessibility. Everything costs more for disabled people, and disabled people's incomes are so squeezed today already. This means we probably need a level of redistributive policy above and beyond a basic income for disability, incapacity, etc so that at the very least a new basic income provision does not reduce these peoples' incomes.

Basic income only conflicts with one specific form of capitalism: The kind that relies on the threat of homelessness to push poor people into exploitative labor. If capitalists truly believed that competition is healthy for the market, they would embrace BI, because it forces employers to compete for employees rather than threaten them.

If one can live off of BI, paid employment is then a means toward *higher* standard of living rather than mere survival. This requires employers to up their game: they must become more appealing to prospective employees, and they must provide *meaningful* work.

BI also reduces the risk of losing employment; this enables literally anyone to become an entrepreneur. Capitalists talk a good game when it comes to innovation, entrepreneurship, and risk-taking. That risk-taking only happens among people who have economic parachutes to soften their fall should they fail. Giving that parachute to everyone will encourage innovation. This effectively "sandboxes" capitalism: everyone shares in the successes and nobody disproportionately takes a hit for failure, unlike the current system where bankers gamble with other people's money and pass the buck when things go wrong.

We can't create jobs out of thin air, and as automation increases, the problem will only worsen. The only sensible long-term solution is to shift to an economy that does not require employment to live, but rather offers paid employment as an option to enrich one's life and community.

A large portion of labor that is necessary for society to function is unpaid (domestic work, often sadly framed as "women's work"). BI solves that problem. Most people, given the chance, want to do meaningful work, especially if it is tied to local community. They don't want to spend the day slaving away in a factory for a pittance. Such mindless labor is quickly becoming obsolete and will not return once automated. It's time to accept that reality and plan ahead for a different world.

right, but £130 won't cover housing, so some people will need to be given free housing, which will be means tested, come with conditions, and mostly undo most of the advantages BI has over the current system (i.e. incentives, stigma, harassing claimants over eligibility criteria etc.)

Presumably though the housing issue would have to be dealt with by other means. Reform of planning, a land value tax, more council housing and a whole other host of policies, which like the BI, have considerable merits but are politically out of bounds.

I suspect the reason BI may be thought incompatible with capitalism is not the prospect of mass-skiving, which is just ideological nonsense (as is "hippie shite"), but that labour prices would shift.

In other words, without the current imperative of poverty, a higher proportion of gross profit would have to go to wages in order to attract labour, thus reversing the trend of the last 30 years whereby more of GDP has gone to capital (and executive wages).

As David Ellis didn't say, the other mechanism that shifts wage levels is full employment, which is why capitalism in its neoliberal incarnation is positively hostile to both it and BI.

As broader secular trends in technology and global development mean that UK full employment is a thing of the past, a basic income may soon be the only viable strategy short of autarky and/or civil war.

Please read my bloghttp://www.clivelord.wordpress.com
Basic = Citizens' Income Can we get away from a preoccupation with capitalism?
I think Philippe van Parijs called a B(or C)I "A capitalist road to communism" Or was it the other way round? - both are true. The C(orB)I is drastically redistributive (I make £160 per adult the minimum), but it allows a raft of ideas which are entrepreneur-friendly. Btw, it will help save the planet, by reducing the pressure to consume, and letting the capitalists down gently.

Far from being 'hippy shite' Basic Income has been around as a proposal since the common land people used for their subsistence first started being enclosed, about 500 years. It has a long and honourable pedigree of proposers including Thomas More, Thomas Paine, John Mill, Bertrand Russell, etc.

Where it has been tried, people have worked more in paid employment, not less, tho usually in self-started businesses. Partly because they get better nutrition, more education and spend time ill as was shown in the 1970s trial with Mincome in Canada. And are not wrapped up in the very unhealthy stress of worrying about where their next meal will come from.

As a benefits advisor, I support Basic Income - partly because I'd rather do other things myself, but also because the latest round of welfare sadism is visibly making my clients more ill - far from 'nudging' them into more activity they are able to cope with far less. When people go on about 'welfare dependency' they have no idea how complicated and demeaning the current system is. Having to regularly (and now incessantly) prove to several state agencies how poor you are or how ill you are at the risk of losing everything is I'm sure has a deleterious effect on both people's health and general ability to participate usefully in the rest of society, whether that's via a paid job or not. It's time to recognise that what people (mainly women as AmyDentata said) normally do unpaid for each other is really what's keeping this society ticking over and fit for any kind of paid employment.

Many of my jobs over the years have been below minimum wage for small businesses who couldn't have afforded more, or more highly paid, but very short-term contracts on specific projects. This was possible because at the time I could claim a form of basic income which barely exists now, income support for single mothers, which made few other demands. On top of that I did a lot of volunteer work to improve my local environment and housing, in museums and other heritage projects as well as raise a child.

Minimum (or Living) wage depends on having thriving businesses able to pay, but these generally start with a lot of free work by the owners and their families. A basic income would at least give employees a way to fight for better wages without risking starvation. 'Full employment' depends on either the government or the market coming up with the jobs, employing people in somehow a non-coercive way - talk about a pipe dream!

The problem with a BI is that the politicians (and the crusading types) could never leave it alone. If it was £x per person, bosh, job done, let everyone sort themselves out beyond that, then it would be a great idea. But the meddlers and the power crazies could never leave it at that and would always be picking on hard cases and demanding special exemptions and the like, mostly out of self interest (how many middle class sinecures in social services would disappear if the only benefit was one cash payment?). In no time at all we'd be back where we started with a rats nest of rules, different levels of payment, eligibility criteria, means testing, the whole nine yards.

So, everyone gets free cash - brilliant. Who's paying for it? Progressive income tax with a generous nil rate band is the closest thing to a fair system as you are going to get with a safety net to tide people over until they get back in their feet and work again.

No one is owed a living. Nothing in nature works like this. It is the efforts of each creature which keeps them where they are or takes them forward.

The main risk as I see it is the huge distortion in vast areas of particularly housing and labour markets. It would likely depress wages at the bottom as a vast number of previously welfare-trapped become available for part-time, insecure work. Housing (assuming the CBI replaced housing benefit) would presumably raise house prices in cheap areas as people are freed from local council bureaucracy to move, and lower the price of rented accomodation in the south.

In truth though it's such an enormous intervention in so many markets, it's impossible to see what the effects would be.

And a half-way house to a CBI would be more expensive, but have little in the way of the policy's benefits. It's not that it's a bad idea, it's just one that is hard to get to FROM HERE.

Finally, you miss the main losers from the Policy: Labour's unionised public sector bureaucracy, who stand to lose hundreds of thousands of jobs.

"No one is owed a living. Nothing in nature works like this. It is the efforts of each creature which keeps them where they are or takes them forward."

I love the appeals to "nature"..... probably by someone who knows less than shit about how nature works.

Prior to man coming along and disrupting their "nature" virtually all animals had a place to live and an environment filled with ample food supply..... all they had to do was use their innate skills to get it. No all animals werent equally successful either within species or between species but every Panda had an opportunity to reach his full Panda-ness from day one (til we decided they looked nice behind bars!!)

With our invention (not discovery!) of money and "work for someone else" we alone have polluted nature and turned a true competition to strive to be the best you can be into a game where once you achieve a certain level of monetary wealth (by hook or by crook) you can virtually own another and discard them when they lose their utility.

The Bobs of the world only see the competition of nature and are blind to the deep levels of cooperation which turn a collection of vastly different species into an ecosystem. Systems require coordination on more levels then they require competition. The returns on coordination are vast and long lasting. The returns on competition much more fleeting. If the competition isnt within some larger cooperative framework its usually destructive not constructive.

I'm disappointed to see anyone here making facile "hippie" or "who pays" claims (hardly arguments) when the list of existing redistribution schemes and distortions is legion (capital gains tax rates, subsidies of all kinds to giant industries and various groups alike, exploitable national and international tax loopholes á la Starbucks, etc.)

Instead, I think it's better to consider the middle- and long-term inexorable shift toward automation and zero-marginal-cost production, and to examine what highly rewarded "productive" individuals actually produce and receive in todays world -- and what this tells us about their true motivations.

Billion-dollar internet and app production is almost completely decoupled from what we think of as "work". Just compare billion-dollar Instagram, Google and Apple to the massive 20th century industrial workforce. The numbers they employ don't factor into the real-world numbers who have to eat.

Now think about who we consider paradigmatically productive, e.g. Steve Jobs, the Google gents, Mr. Buffet, etc. None of these universally acknowledged (and not seldom despised) capitalist wonders would be dissuaded from work by a 200 quid allowance. In fact, every one of them could buy a private island and spend the next 40 years growing their fingernails. And yet they continue to produce; Oh, Wonder!

I see negative work incentives as real for some, but only for those unlikely to be high producers anyway. And I find it uncontentious to claim that ensuring purchasing power to stabilize the economy and to reduce human suffering has clear value, ceteris paribus, unless you believe in the economic moral equivalent of scourging.

Which you may, but I think that's nuts and stay away from my daughter.

So what we're left with are real questions about the real world and how such a thing could be implemented -- and nothing says it's possible! But it _seems_ possible, and sober study is likely to produce more revelatory answers than ad hoc invective and pseudo-moral neocon spoutings.

Likely every contributor here would be a net loser in such a scheme (myself included!), but that doesn't make implementing it wrong.

Sometimes I am astonished at the naivety of our blogger and several of the commenters.

Let's talk practical stuff first, like politics.

In the past two dozen years both conservatives and new labour have provided a massively generous tax free far-from-basic income for landlords only:

http://www.bbc.co.uk/news/business-19288208
«In 2001, the average price of a house was £121,769 and the average salary was £16,557, according to the National Housing Federation. A decade on, the typical price of a property is 94% higher at £236,518, while average wages are up 29% to £21,330»

This means that in those 10 years landlords of average UK 2-up-2-down terraced houses have enjoyed a "basic income" of (usually) tax-free capital gains of around £12,000 per year (£200 per week), on top of £14,000 after-tax average earnings, all thanks to a bubble of unlimited credit arranged by various governments who have been very popular as 60-70% of voters are property speculators. To the point that the current one have decided that their main vote-buying strategy to fight off the UKIP attack on their core southern voters is to reward those core voters with another massive round of credit fueled property speculation in the South, and damn the losers in the North and the celtic fringe.

This "basic income" of £12,000 a year has also been a purely regressive income redistribution from people from less property to people with more property.

In other words, a form of "basic income" is reality that has been happening for decades, and the average UK voter is a property speculator who has been very satisfied with making a large additional "basic income" squeezed from people poorer than themselves, and wishes that those people poorer than themselves had lower wages and a higher unemployment rate so that landlords would find cheaper hired help.

Thus it is not just striped suit wearing capitalists as in «However, this is certainly not in the interests of capitalists, who want a large labour supply» but also most UK voters who want it, to drive down their costs, as many of them are more invested in property than labour, especially of course if they are retired wannabe ladies of the manor, whose aim is to soak the poor.

Then I read entirely comical statements like "The main risk as I see it is the huge distortion in vast areas of particularly housing and labour markets" as if the two dozen years of colossal credit bubble delivering massive capital gains for decades to property owners had not happened, plus the delivery of gigantic supplies of 0.25% credit plus sweet deal bailouts to bankrupt banks and other friends-of-friends, and only to them, to keep a whole caste of parasitical spivs in the style they are entitled for being the "best and brightest".

In the Mincome study, people continued to work as before, except students stayed in school to get a diploma rather than dropping out to take entry level jobs. http://en.wikipedia.org/wiki/Mincome The amount provided was roughly equal to today's welfare payment to single adults, I.e. pretty minimal. Yet it was enough to make a difference.

Unmentioned in the comments above is that BI would allow parents to stay home with the kids as needed, or assist other family members through illness or disability. Extended families could re-form, with all members contributing to the household rather than increasingly loading the most compassionate families to the breaking point.

Would BI be good for business? Heck yes. Currently, capital is flowing upwards, leaving the mass of the population in an arid, desert-like liquidity situation. What is it now, $3T sitting idle in corporate or bank coffers? Poor people are both the worst and best customers. Worst, because they have little cash. Best, because when they do have it, they spend it. They talk about the money in the mattress, but it gets spent on bills and bread long before it ever gets near the Posturpedic.

If you want a sound-bite about this, simply ask your local small businessperson who makes the usual right wing arguments, "What percentage of your customers have no income?" When businesses compete in the dive to the bottom of wages and benefits, they cut their own and each other's throats by creating more non-customers. Yet, each business alone has to do this in competing with other businesses, so long as their collective pool of capital is siphoned off out of the profit stream. BI would, to some extent, return this liquidity to the roots of the economy, offsetting the cactus-like hoarding of the biggest players.

Of course, if you want an economy that consists entirely of necessities and "rents" taken off the top, and dollar stores and Walmarts subsisting on the crumbs of disposable income at the bottom, with a scattering of Laputa islands of luxuries for the well to do, then you're in luck. That's what we will have if we don't find a way to return liquidity to the majority of the population.

It has nothing to do with "deserving." In an economy where only 1/4 of the people are needed to do all the work, it is only practical to keep the cash moving, by whatever means.

- The bureaucracy cost appears to be 1-2% of welfare/pension spend based on the DWP's budgets (£5bn admin cost of which significant proportion is spent on back to work services not processing benefits).
- Any benefit or tax credit spending on disability, housing need or support for those with children (i.e. child benefit) is on top of the BI or it reduces BI.
- Likewise if you get rid of pensioners out BI the BI level for the rest drops disproportionately.

So let's assume a change of £270-300bn spending moving from benefits/tax credits/tax relief to BI.

- For individuals we have a "benefit cap" of £6760 for an individual. A tiny bit lower than £25,000.
- Significant incentive at lower incomes to cohabite in order to share housing costs. If combined with a land tax unpredicatable impacts in London.
- At lower incomes a disincentive to have children (making some assumptions about reference points).
- We increase the relative poverty rate significantly for those with children and not in work.
- We also redistribute spending slightly to those with higher incomes and less propensity to consume. (adjusting for money being drawn from pensioners to working age people).

What might be some medium term impacts? Well immigration is an obvious place to start. When I asked Chris years ago (through a comment) he replied that of course there would be a waiting period or other type of criteria.

Whilst this might solve any labour supply difficulty for firms there might be some unpredictable impacts on Government spending more widely than just BI as the population expands dramatically in a short period.

I'm actually quite keen on BI but you need a pretty strong stomach to pursue all of that.

Squaring the triangle: a high Guarantee and low tax back rate, results in large costs to gov't and limited work disincentives. A low guarantee, high tax back rate, results in high work disincentives, but low costs to government. Etc. etc. Think about all scenerios (they are obvious and I do not want to waste space going through them here). But, the bottom line is Basic Income guarantees with a tax back have implications for cost to government and work incentives. i.e tradeoffs. I favour a high guarantee and as low a tax back as possible given I believe (largely) in a luck theory of income distribution and that labour supply elasticities are small. But my beliefs are not widely shared except by economists who who did work on GIA experiments

You’re doing a splendid job living up to the name of your blog. Your ruminations are an effect of a purely or largely economic gestalt. They neglect the history of Puritanism and Calvinism. They neglect Social Darwinism and the mythology of Individualism. They neglect the prevalence of the myth of free will.

And as a matter fact they neglect economics. The global labor force has doubled since 1990, labor is plentiful, capital is in the driver’s seat and controls American and British politics. The wealthy are a selfish, stupid psychopathic lot for whom no amount of wealth is sufficient. They have no grip on morality, all they care about are their desires and their positions with regard to their reference group. Politicians do their bidding unless a sufficient number of organized citizens threaten to turn them out of office. Americans are also desperately afraid that someone else is going to take advantage of them or get an advantage they do not have. Astonishingly enough this sentiment / fear was prevalent in the Great Depression among people who should have known better.

To get an idea of just of deranged the wealthy are, Levy (a partner of Oppenheimer) who founded the Levy Institute at Bard College with an endowment of several hundred million dollars said in his autobiography that he did not consider himself a rich man!

There are many impediments to morally enlighten social policy and some are very irrational especially in an economy that is 70 percent consumer. Even Milton Friedman favored the so-called negative income tax.

«The wealthy are a selfish, stupid psychopathic lot for whom no amount of wealth is sufficient. They have no grip on morality, all they care about are their desires and their positions with regard to their reference group. Politicians do their bidding unless a sufficient number of organized citizens threaten to turn them out of office.»

But please, again consider reality: on this planet, that describes the vast majority of voters, in both cases.

It is difficult to base any argument on the disregard of the Basic Income that has been generated by Government policy but only for wealthy property owners, which as I remarked previously has given benefits worth 12,000 a year to median voters for at least a decade.

Since 60-70% of voters are property speculators they see as admirable a form of Basic Income that rewards their incumbency, and as odious any Basic Income that goes to the working or unemployed poor.

The current Government serves that 60-70% of voters, by enacting the Osborne House Bubble Guarantee, and making a big show of immiserating the working or unemployed poor.

The 60-70% of voters who are vested in the joys of landlordism reckon they are part of the "selfish, stupid psychopathic lot for whom no amount of wealth is sufficient. They have no grip on morality, all they care about are their desires and their positions with regard to their reference group".

The vast majority of UK landlords and other asset speculators have completely bought into the model of a plantation economy, with themselves as plantantion lords.

It may be surprising the types and quantity of businesses that simply wouldn't exist in a world where employers have to compete for employees at every level, and can't count on overwhelming social pressure pushing down wages. Life would be ... simpler. We would likely have a lot less choice in entertainment and luxury goods.

Overall, less business would likely be happening, as the risk of investing would be much higher. While this may be a preferable world to some, where the best case scenario might be a greater focus on businesses doing something "that really matters", it goes directly against the core human instinct of wanting "more" that drives the most powerful people in our society, who seek better and cheaper investment opportunities for their capital.

amount of facepalm in both the article and comments only confirms my worst fears. how about taxing money creation (positivemoney.org) if you wanted to raise some cash for various social projects, whatever they may be. another thing nobody ever talks about is abolishing the military. the blindness of people still investing faith in the political system despite it consistently being unfit for purpose and corrupt to the core depresses me.

This and the Citizen Income (linked above) are very interesting - and not so far off how some oil monarchies currently operate. There's a few problems with it as it stands however:
- The £338bn it would cost to give 50m UK adults £130 a week isn't matched by the £230bn odd benefits/tax credits bill, although it's near enough to suggest this really needs further investigation..
- At the same time, £130 a week isn't enough when housing is included (and even then it's only just liveable).
- The proposal is dependent on sufficient individuals - and companies based here - paying enough tax to cover this (and everything the other costs of government). But the disruption to the (to use an ugly phrase) labour supply seems likely to push wages up as it would make minimum or low wage for a dull or unpleasant job far less attractive. At a time where globalisation has sent countless jobs overseas because labour is much cheaper there, higher wages would arguably increase this trend. This in turn would reduce tax receipts and increase the current deficit - interest on which currently costs over £40bn (more than JSA, housing benefit, DLA & income support combined).

However perhaps there's another approach which at the same time could deal with the fact that society:
- has unappealing jobs (eg cleaning sewers, mindless data entry) that need to be done. something like 60-70% of people aren't happy with their jobs.
- has inordinate amounts of needless bureaucracy and inefficiencies that in many cases exist only to protect jobs
- more and more of our society is being automated - which is continuing to destroy industries (compare the amount of people employed to print, ship, warehouse and sell a book in a bookstore with buying the same book for an ebook reader), and this means a continual downward trend in the amount of jobs (and taxes) going forward.
- that almost everybody in full time work would like more free time - for family, friends, study, creative pursuits, ventures, minecraft, sleeping and so on.

A way to achieve that, in short, would be a part time work scheme that guaranteed everyone who worked 2-3 days a week a liveable (albeit lowish) wage (eg £250/300).

The approach is driven by the fact that an increasing proportion of people have 'work' that they enjoy doing that is unlikely to make them money (anything from volunteering to blogging, filmmaking, music-making, making stuff, and so on) and things they can do that makes them money but might not be stuff they enjoy, or want to do forever.

Surely there's a middle ground where we spent around half our working week doing the work we were good at but perhaps uninterested in, and the other perusing that which we enjoyed but was unprofitable (and which might, of course, just be playing video games, reading or sleeping)? In return we receive a standard uniform guaranteed income of perhaps £2-300 a week (that should increase with age and with dependents - and of course cover inability to work, holidays, pension, etc).

Imagine starting your working week by viewing a list of needed work a computer suggests is suitable for you based on what you're good at and experienced in - and being able to pick between them to make up your 20ish hours work. Perhaps you chose stuff that's complimentary to what you do the rest of the time - if you're staring at a computer writing your novel during your free time, 20 hours working a vegetable patch or painting window frames - or in a lively office - might be just the break you need. The idea would be to match up abilities with needs - which networked systems can do now, relatively easily.

The businesses, charities and government departments that employ you could cover most of the costs, the end of lots of benefits and tax credits could cover the rest. (And of course people could still work full time in high paid jobs as they wished).

On one level it's the guaranteed work and income of communism but coupled with the deregulated capitalist goal of being able to get workers without contracts or commitments, and only to pay for as much work as is needed. It would reduce the cost of finding workers - and the pain of looking for jobs. It would protect against the negative economic effects of automation and efficiency by guaranteeing people the support they need to pursue their own interests (which could of course still include setting up a venture and employing people under the same terms). The greater the automation the less of each week would need to be worked, while the huge space that would be opened up for creative and social activity and enterprise could shift the economic focus into more sustainable areas - so eventually more and more people could spend their 20 hours doing the thing they used to do in their spare time.

And it also doesn't require an end to capitalism to exist. It co-exists pretty well with it, while shifting much of it to being worker/human centred & more sustainable. It could presumably also be tested on a smallish scale within a society that was afraid of the unknown consequences.

I'm sure there must be problems with this.. but can't see them so would love to hear them!

You should write a followup post that summarizes what is being said in the comments. They're too many to read right now, but there seems to be interesting ideas being expressed.

One thing I wonder is if BI were put in place, whether anti-government militia and secessionists would have more free time to plot, gather resources and be more violent without having to work or having the stigma of unemployment dampen their psychotic narcissistic fantasies.